House Financial Services Committee Holds Hearing on Overdraft Fees
Last week, the House Financial Services (HFSC) Subcommittee on Consumer Protection and Financial Institutions held a hybrid hearing entitled, “The End of Overdraft Fees? Examining the Movement to Eliminate the Fees Costing Consumers Billions.”
“For far too long, banks have been charging excessive overdraft fees,” said HFSC Chairwoman Congresswoman Maxine Waters (D-Calif.) in her opening statement at the hearing. “And of course, I am very troubled that consumers of color pay twice as much in fees as White consumers.”
At the hearing, lawmakers argued whether reining in overdraft fees will actually protect account holders, or if it will have negative consequences for small banks and consumers. Democrats celebrated banks and regulators that have worked to eliminate the fees, contending that they have an unfair impact on poor consumers of color.
“In an average year, consumers in the United States pay around $10 billion to $12 billion in overdraft fees and nonsufficient fund fees, and just 9% of consumers take up 80% of those overdraft fees,” said HFSC subcommittee Chair Ed Perlmutter (D-Colo.), according to American Banker.
Alternatively, Republicans argued that overdraft fees are an affordable and valuable short-term credit product for consumers with few options. They also raised concerns that eliminating overdraft options could drive consumers with lower credit scores toward unregulated predatory lenders, or could harm smaller banks that rely on those consumers.
“Eliminating overdraft fees threatens to reduce consumers’ ability to access short-term liquidity financial products,” said Representative Blaine Luetkemeyer (R-Mo.).
Video of the hearing and copies of witness testimony are available on the Committee’s website.